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Credit Scores May Not Buy You Cars

By Brian Anderson
Published: Sunday, August 8th, 2010

11Shop around. What’s that supposed to mean?

That means consumers have to look for shops that sell the items they need and make comparisons on the prices plus the benefits. This applies to almost all merchandise items. Cars and auto loans included.

The reason why shopping around for auto loans are strongly advised, is because it is involved with probability of being scammed or being charged with unfair rates.

One customer, for instance, has complained about his auto loan being denied while he knows he has good credit standing. Auto finance lenders and car dealers can lie about the scores and target customers who don’t check their credit reports and credit stores. They say that the customers’ credit scores is too low that they may either approve the loan but with a high APR or decline the loan and let the customer get on his way home.

Customers who are desperate to have their own car can make a deal by agreeing to pay high interests just to get the car. Later on, when the customers discover that they have good credit scores from the credit bureaus they will go back to their dealers and demand for explanation. Here’s where the lenders would lie more. With their convincing tone and expression, they may accuse the bureaus for being unbiased and giving them wrong scores. This is one reason why a new law was approved in the Congress right now. The Restoring American Stability Act of 2010 included a rule that customers who get denied of new credit or insurance are granted free access to their credit scores. The lenders or dealers must show the credit score they based on and justify why they have to decline the loan or increase the charges.

Now to the legal basis why auto dealers have the right to deny, customer loan applications. Car dealers and financers may be using their own credit scores such as, FICO Auto Industry Option score, instead of the common credit scores. They have the right to use those scores since they have the discretion to approve or deny the applications. They use the basis that they think is appropriate. Traditional credit scores and the Auto credit scores differ in how the lenders put the weights on the components of the credit report. Auto dealers put on more weight on how the customer has dealt with previous auto loans. If the customer has dealt with their credit cards perfectly but not much on their previous auto loans, their FICO scores will be high, but to auto loan financers, the scores will be low. This means that even with a bad credit card history but an excellent auto loan history, customers will have higher chances of having their loans approved.

Whatever reason there is for being approved or denied in one loaning company, it’s always best to shop around. Shopping around patiently can help customers to get loans with the lowest interest and to avoid scams.

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